Alvarez & Marsal will help the department with virtually every aspect of management: contracting, setting Medicaid rates, auditing, budgeting and managing information technology and privacy concerns.

"We need to act quickly to restore trust in the the management of the Medicaid program, and to reduce the potential for fraud and abuse," Rod Davis, the department's chief financial officer, wrote in a Nov. 15 memo. "We cannot wait any longer to resolve these problems."
Secretary of Health and Human Services Aldona Wos also announced a half-million-dollar sole-source contract with the consulting firm Navigant to improve the department's ability to detect fraud and aberrant billing.

Wos has been criticized for previous sole-source, or no-bid, contracts: a $312,000 annual contract for former State Auditor Les Merritt, and another worth $310,000 a year for Joe Hauck, a vice president at the company owned by Wos' husband.

Sole-source contracts are not opened up to the state's usual bidding process because, the argument goes, only one person or company can provide the services needed, so only that person or company would bid on it.

Alvarez & Marsal has a tall job before it. According to its website, the company is "often compared to corporate doctors" and specializes in turning around companies and restructuring corporations. The department said the company had experience in North Carolina on previous contracts and that no other company was capable of stepping in to do the job.

The contract with Alvarez & Marsal spelled out the hourly rates for the nine-person team: $473 an hour for each of three principals of the firm, $394 an hour for each of three consultants, $242 an hour each for two analysts and $84 an hour for an intern.

DHHS mum on deal
The News & Observer requested public records relating to Alvarez & Marsal eight weeks ago. After repeated requests, Gov. Pat McCrory's office released two documents Thursday evening; the Department of Health and Human Services released some of its records Friday evening, after issuing a news release about the Alvarez & Marsal contract.

In a statement, DHHS spokesperson Kevin Howell said the agency released the contract the same day that it had a fully-signed contract in hand.

The records from the governor's office used the cautious language of bureaucrats to describe a division in disarray, requesting "emergency staffing" to operate Medicaid and its troubled new claims processing system, known as NC Tracks.

The Medicaid division "does not have adequate staff with the necessary experience and skills to properly manage the state's $13 billion a year Medicaid program," according to the Nov. 15 memo to State Budget Director Art Pope. "The current staff that is qualified is consumed with daily problem solving related to the implementation of its Medicaid computer system, NC Tracks, and the Affordable Care Act. The department has not been successful in recruiting experienced and qualified staff to alleviate this problem."
Last month, a group of doctors sued the department and a software vendor over the failure of NC Tracks to pay claims. In December, the agency put the privacy of 48,752 children at risk by mailing Medicaid insurance cards -- which include their names, dates of birth and Medicaid identification numbers -- to the wrong addresses.

Rep. Verla Insko, a retired health administrator from Chapel Hill, said department officials have told her that the wheels were coming off the Medicaid division, which Insko said has scores of vacancies.

"They've lost so many of their senior staff that nobody knows what's going on over there," Insko said.